Interestingly, the average size of the deals struck by foreign investors were also much larger than those by Indian investors. For example, in FY19, the average deal size by foreign investors was $644 million as opposed to $144 million by Indian investors.
The reason for Indian companies falling back in the acquisition stakes is not hard to seek. Reeling from the burden of debt, Indian business houses have been focusing on monetising their assets rather than acquiring fresh assets. In 2017, a Credit Suisse report said that corporate India was getting into a debt trap. It estimated that 40 per cent of the $530 billion India Inc couldn’t even honour their interest payments. This is also reflected in the fact that the credit growth to industry contracted in 2016-17, and grew by a mere 0.7 per cent in 2017-18. Moreover, the share of incremental credit of banks to industry fell to a mere 3.3 per cent in the same financial year.
Industry experts say that Indian business houses monetised their assets to reduce their debt by over Rs 3.50 trillion. For instance, the GMR Group has reduced its debt from a peak of Rs 32,000 crore to around Rs 12,000 crore. A few days ago, the Anil Ambani group announced that it had reduced its debt by over Rs 35,000 crore while the Ruias have cut back their debt by over Rs 1.35 trillion.
Some Indian companies have shaved off their debt burden on their own while others had to go to the Insolvency and Bankruptcy Code (IBC). But a large part of the money for reducing the date burden has come from foreign investors picking up controlling interests in these companies. Among them, private equity funds have played an aggressive role. The latter’s investment in buying controlling stakes in Indian companies went up from $4.89 billion in 2017 to $5.92 billion in 2018.